GST Reduction to Boost Renewable Energy

Summary of Key Highlights on GST Rationalisation in Renewable Energy:

• GST Rate Changes:

  • GST on renewable energy devices reduced from 12% to 5% as approved by the GST Council on September 3, 2025.

• Impact on Clean Energy Projects:

  • This change will lower costs for clean energy projects, making electricity more affordable across various sectors, including households, farmers, and industries.
  • Estimated savings of ₹20–25 lakh per MW for a utility-scale solar project, leading to a ₹100 crore reduction for a 500 MW solar park.

• Overall Financial Savings:

  • Expected nationwide annual savings of ₹2,000–3,000 crore in power procurement costs for distribution companies (DISCOMs).

• Benefits to Consumers:

  • Rooftop solar systems will be ₹9,000–10,500 cheaper for households, enhancing accessibility under the PM Surya Ghar: Muft Bijli Yojana.
  • Farmers using PM-KUSUM scheme can expect savings of about ₹1,750 crore collectively from reduced costs on 10 lakh solar pumps.

• Support for Domestic Manufacturing:

  • The reduction in GST will lower module and component costs by 3–4%, enhancing competitiveness for Indian-made renewable energy equipment.
  • Aligns with Make in India and Aatmanirbhar Bharat initiatives, targeting 100 GW of solar manufacturing capacity by 2030.
  • Potential creation of 5–7 lakh direct and indirect jobs over the next decade.

• Encouraging Energy Transition:

  • GST reforms bolster investor confidence, promoting faster power purchase agreements and project commissioning.
  • India aims to add 300 GW of renewable energy capacity by 2030; modest cost reductions could free up ₹1–1.5 lakh crore for investments.

• Environmental Impact:

  • Each GW of solar capacity saves approximately 1.3 million tonnes of CO₂ annually.
  • Accelerated deployment could prevent an additional 50–70 million tonnes of CO₂ emissions by 2030.

• Alignment with International Commitments:

  • Reforms support India’s commitment under the Paris Agreement and the national target of 500 GW of non-fossil fuel capacity by 2030.

• Implementation Date:

  • Revised GST rates effective from September 22, 2025.

• Government’s Long-term Vision:

  • The initiative underscores the commitment to making clean, affordable, and sustainable energy foundational to India’s goal of becoming a Viksit Bharat (Developed India).

This reform is expected to catalyze growth in the renewable energy sector, enhance energy security, and contribute to environmental sustainability in line with global climate objectives.